COVID-19 impact on Hertfordshire October 2020 Economic impact - - PowerPoint PPT Presentation

COVID-19 impact on Hertfordshire

October 2020

Economic impact

Modest economic growth in August

• Monthly Gross Domestic Product (GDP)

grew by 2.1% in August 2020 following four successive months of growth:

• 2.7% in May
• 9.1% in June
• 6.4% in July

Modest economic growth in August

• The easing of lockdown restrictions, Eat Out

to Help Out scheme and ‘stay-cations’ boosted consumer demand.

• Accommodation and food services

contributed 1.25% to GDP growth.

• But the level of output has not fully

recovered from the record falls seen across March and April 2020, and is still 9.2% below the levels seen in February 2020.

• GDP grew by 8% in the three months to

August 2020 as restrictions on movement eased.

• Strong bouncebacks over rolling three

month period (June to August) in:

• Construction – 18.5%
• Manufacturing – 11.3%
• Services – 7.1%
• Fragility of recovery underlined by 45% of

businesses reporting in September that turnover had decreased below what is normally expected for the month.

UK economy grew by 8% over the summer

Growth slows in October

• Business confidence indicators reported a

reversal of output in October following the summer’s recovery.

• There was an overall increase in business

activity in October, but the rate of expansion slowed considerably during the month.

• There was a much weaker contribution from

the service economy due to hospitality sector restrictions.

• Service providers reported a decline in new

business for the first time since June.

• In contrast, there was another solid

expansion in new orders for manufacturing companies in October.

Growth slows in October

• The Flash UK

K Manufact cturin ing PMI, an indicator of manufacturing performance, dropped from 54.1 in September to 53.3 in October - the slowest improvement in

• verall business conditions since July.
• The fall reflects weaker rises in output and

new orders and a faster decline in staffing.

• However new export orders increased at

the fastest pace since February 2018, with rising demand from clients in China and the US, and a temporary boost from Brexit stock building among clients in Europe.

• The Flash UK

K Servi Services es PMI was at 52.3 in October, down from 56.1 in September and well below August's peak of 58.8 - the worst performance for the sector since June.

• The latest setback for service sector
• utput was due to a renewed downturn

across the travel, leisure and hospitality industries.

• Output was impeded by tighter restrictions
• n trade and the impact of local lockdown

measures on consumer spending.

Purchasing Managers’ Index (PMI)

• Deep job cuts signalled in both the

manufacturing and service sectors.

• Lower staffing numbers attributed to

redundancies and the need to reduce

• perating costs amid shrinking customer

demand.

• Employment confidence was the lowest

since May, mirroring the trend for current business activity.

• Worsening outlook was centred on the

service sector.

Employment confidence levels fall

Consumer spending recovers in some areas

• Social spending remains suppressed but

spending on ‘staples’ and ‘delayable’ goods are now above levels seen towards the beginning of lockdown.

• Strong substitution across categories of

spending suggests aggregate consumer spending has recovered.

• Though consumers have cut back on social

spending, they have increased spending in

• ther categories and this has helped to

lessen the economic impact.

High frequency spending indicators

But retail continues to show signs of stress

Aggregate consumer spending has returned to levels seen at the start of the year (even if some of that strength is temporary). Indicators related to investment and employment have remained quite weak.

Investment and employment intentions remain weak

Labour market impact

• There is a threefold increase in people

registered for Universal Credit in the county, compared to the same time last year:

• 38,775 claimants in September 2020
• 13,035 claimants in September 2019
• Hertfordshire fares better than the national

average in terms of the proportion of working age residents claiming benefit:

• 5.2% in Hertfordshire
• 6.5% for the rest of GB
• Both Watford and Broxbourne have claimant

rates that are worse than the national average

Universal credit

• As with the rest of the country,

Hertfordshire’s claimant count dropped slightly in September, compared to August.

• Of Hertfordshire’s 10 districts, only Watford

and Broxbourne experienced claimant count rates above the national average. This

• ccurred for four consecutive months, from

June to September 2020.

Universal credit

Universal credit

• Claimant count is currently at a 15 year high.
• Coronavirus can be said to have had more
• f an impact on the claimant count than any
• ther event, since 2008/2009.

Claimants as a proportion of residents aged 16-64

Count of Unique Job Postings by Month - Hertfordshire

Job postings

• In the first quarter of 2020, job postings

were 8% higher in Hertfordshire than in the previous year. This compares to 5% in England.

• Post lockdown (23 March), there were

53,000 fewer job postings from April to September compared to the corresponding period in 2019.

• This represented a fall of 21% in unique job

postings over the six month period - a rate broadly similar to England, which saw a total

• f 286,669 (20%) fewer postings than 2019.

Count of Unique Job Postings by Month – England

Universal credit

• Hertfordshire ranked 20th out of the 38 LEP

areas in England in terms of redundancy notifications between June and Sept 2020.

• 3,861 redundancies were reported in the
• period. This equates to 0.6% of county’s

workforce.

• Hardest hit sectors include:
• Accommodation and food services
• Distributive trades (including retail)
• Manufacturing
• Professional and scientific services

HR1 redundancy notifications in Hertfordshire June - Sept 2020

Business environment

Business stock

• The true extent of the pandemic on the

business base will not be seen until the next release of statistics in September 2021.

• However, the impact of tiered lockdowns is

expected to hit the food, catering, hospitality and retail sectors hard and we can expect significant reductions in the business stocks

• f those industries.
• On 13 March 2020 there were 1,710 fewer

businesses in Hertfordshire than on the same date in 2019.

• 5.0%

% Growth rate in both business stocks and GVA in Hertfordshire

Private sector business base

• Hertfordshire’s business base was shrinking

in the lead up to the lockdown on 23 March:

• The number of incorporated companies, sole

traders and partnerships fell by 2.6% compared to a net gain of 1.2% for GB as a whole.

• Self employment continues to follow the

national trend but it is falling at a faster rate.

• The charitable and not-for-profit sector

gained in size in 2020 against the backdrop

• f a decline in numbers nationally.

Legal status

2019 2020 % change Herts GB Herts GB Herts GB

Total

65,640 2,643,875 63,930 2,674,520

• 2.6

1.2

Company (including building society)

54,065 1,940,185 52,830 1,992,065

• 2.3

2.7

Self- employed

9,870 606,310 9,385 585,435

• 11.0
• 7.5

Non-profit body or mutual association

1,505 84,835 1,520 84,520 1.0

• 0.4

Business size by sector

• 60% of Hertfordshire’s business population

is represented by micro businesses across just five industry sectors:

Professional, scientific & technical 12,360 Construction 8,940 Information & communication 7,245 Business administration & support services 5,165 Retail 4,150

• The highest number of medium and large

sized firms are in:

• Business Services
• Education
• Health
• Manufacturing
• These are sectors where large business

failures would have the highest impact in terms of job losses.

Coronavirus Business Interruption Loan Scheme

• The CBILS scheme is aimed at larger SMEs.
• As of 5 October 2020, just under five in every

ten eligible businesses in Hertfordshire have secured loans under CBILS, backed by the British Business Bank.

• This is equivalent to 2% of Hertfordshire’s

business population being in receipt of CBILS.

• 1,394 loans of £354m have been made to

businesses in Hertfordshire at an average loan size of £254k.

Number

• f Loans

Offered Value of Loans Offered (£) Average Loan Size

Hertfordshire (PCON) Totals 1,394 £354,119,170 £254,031

Broxbourne 112 £26,519,808 £236,784 Hemel Hempstead 97 £25,229,984 £260,103 Hertford and Stortford 137 £33,331,377 £243,295 Hertsmere 157 £47,250,245 £300,957 Hitchin and Harpenden 121 £24,187,634 £199,898 North East Hertfordshire 130 £27,602,617 £212,328 South West Hertfordshire 134 £36,370,087 £271,419 St Albans 145 £33,230,083 £229,173 Stevenage 87 £23,533,747 £270,503 Watford 156 £41,765,751 £267,729 Welwyn Hatfield 118 £35,097,836 £297,439 Source: British Business Bank - 5th October 2020 Parliamentary Constituency (PCON) CORONAVIRUS BUSINESS INTERRUPTION LOANS (CBILS)

Bounce Back Loan Scheme

• Bounce Back loans of £0.8bn have been
• ffered to 27,743 businesses in

Hertfordshire.

• The average loan size is just over £31,200

per company.

Number of Loans Offered Value of Loans Offered (£) Average Loan Size

Hertfordshire (PCON) Totals 27,743 £867,624,250 £31,274

Broxbourne 2,733 £84,670,654 £30,981 Hemel Hempstead 2,335 £69,979,009 £29,970 Hertford and Stortford 2,764 £87,126,575 £31,522 Hertsmere 3,562 £114,710,791 £32,204 Hitchin and Harpenden 2,033 £63,427,393 £31,199 North East Hertfordshire 1,870 £56,272,330 £30,092 South West Hertfordshire 2,642 £86,743,669 £32,833 St Albans 2,389 £76,264,989 £31,923 Stevenage 1,804 £52,320,617 £29,003 Watford 3,393 £108,121,618 £31,866 Welwyn Hatfield 2,218 £67,986,606 £30,652 Source: British Business Bank - 5th October 2020 Parliamentary Constituency (PCON) BOUNCEBACK LOAN SCHEME (BBLS)

CBILS and BBLS

• In all, up to 46% of the county’s small

businesses have taken advantage of these potentially lifesaving business support schemes.

• Combining the total amount of funding

available under both schemes, the reach into the market is greatest in Broxbourne (61%) and Watford (54%). Watford and Broxbourne are also the only two Hertfordshire districts that experienced claimant count rates above the national average.

• f All Loans

Conclusions

• The economy contracted sharply following

the lockdown in March, but there were signs that the business sector was already cooling.

• As restrictions eased over the summer, the

beginnings of a nascent recovery began to emerge.

• Tourism & hospitality and retail sectors were

hardest hit by social distancing but other sectors showed positive signs of growth.

• The easing of restrictions, the maintenance of

consumer spending and government support for business helped drive a mini recovery over the summer. But significant headwinds remain as new lockdown restrictions are put in place going into November.

He knows not his own strength who hath not met adversity.

WILLIAM SAMUEL JOHNSON

“

About us www.hertfordshirelep.com Follow Twitter: @HertsLEP